Look away. Hide the children.

At one point, for the majority of people in America, it will no longer make economic sense to keep paying their mortgages.

What happens when the homedebtors of a nation simply walk away?

Hint. You'll need more popcorn.

No matter what the NAR, CNBC and realtors on commission tell you.



[image source]

As homeowners head 'underwater,' another housing crisis looms

Almost half of homeowners with a mortgage could be underwater by 2011, says Deutsche Bank.

I think the surprise is prime quality mortgages. That's where the biggest deterioration could take place in the next leg. Right now about 16% of those borrowers are underwater. If our home price forecast is correct, down another 14%, we could have 41% of borrowers underwater in the prime mortgage space. That's what happens when another 14% decline occurs.

Does this lead to a new wave of foreclosures?

Well, we don't think that the wave has stopped in any sense. But the wave is clearly building. That is evident by looking at serious delinquencies. If you look at a chart of how many borrowers have missed more than two payments, a large portion of those people are going to end up being foreclosures.

Well, that rate of serious delinquency has been rising rapidly and continues to rise, pretty much in tandem with unemployment. As long as you have serious delinquencies going up, you know for the next year and a half, a large portion of those are going to turn into foreclosures.

Of subprime and Alt-A (Alternative A-paper) borrowers, about 33% of those borrowers are seriously delinquent. If you look at prime jumbo, the highest quality mortgages, 6.2% are seriously delinquent. That sounds like a low number. But two years ago that number was 1%. It's a very straight trajectory from September 2007, pretty closely mimicking unemployment.

At what point of being underwater do homeowners start falling into foreclosure rapidly?

Once you get to the point where negative equity is significant -- for example, 25% or more -- there have been studies that suggest you get more strategic defaults.

People say, "I bought my house for $500,000, it's worth $250,000, there are 10 available for sale in my neighborhood. It makes no economic sense to spend the rest of my life trying to pay off a $500,000 debt when there's no reasonable likelihood to expect this house to go back up to $500,000."

Bull. Bear. Keyboard Cat.

Bull:

Bear:



Keyboard Cat:

If you're Phoenix realtor Greg Swann, who in 2006 told people to BUY BUY BUY (and had 21 reasons), this graph should just about do the trick.

Them facts, they can be pesky little things.

Karma can be a bit of a bitch too.

And gravity.

Shouldn't the commissions for expert "advice" and "guidance" be given back?

Here ya go. Like "Suzanne", one for the ages.


21 reasons to bank on the Phoenix real estate market (July 2006)

Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.

That’s all one. I don’t care. The whole of the last century was dominated by the bad behavior of viciously angry wretches, but look where it got them. The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish. You will know and I will know and in the secret chambers of their hearts they will know they were wrong all along. But as long as you don’t hold your breath waiting for that contrite admission of error, you should be fine.

In any case, here do I compile my list of 21 really good reasons to bank on the future of the Phoenix area real estate market:

1. The migration from the Snow Belt states to Metropolitan Phoenix has been unabated for 60 years.
2. A similar extended migration is now occurring from the Northwestern states and Western Canada.
3. The “installed base” of all those migrants brings a steady stream of extended family members.
4. Proposition 13 makes moving up difficult in California; many Golden State sellers buy in the Phoenix area.
5. Californians in pursuit of other objectives — e.g., a friendlier business climate — migrate to the Valley of the Sun.
6. Baby Boomers will retire in droves to warmer climes — the Atlantic coast, the Gulf states and the Southwest.
7. Among those locales, Phoenix is by far the least prone to natural disasters.
8. Because of this, people from disaster-afflicted regions have formed a new stream of in-migration.
9. There is a steady migration of new residents from Spanish- and Portuguese-speaking countries south of the border.
10. Phoenix is a destination of choice or the second-landing city for immigrants from all over the world.
11. While higher oil prices will put a strain on our far-flung suburbs, the greatest pain will be felt in Northern states where fuel oil or natural gas are used as heat sources; even people who don’t hate the winter will move to the Phoenix area to escape high heating bills.
12. The Phoenix Metropolitan area is a dynamic jobs creation machine, adding tens of thousand of new jobs every year.
13. People who have or hope to have children move here as soon as they can manage it.
14. Compared to the areas from which many of our in-migrants are drawn, our homes are still very affordable.
15. We build thousands more new homes every year.
16. The Greater Phoenix area has 60 years of sustained practice at managing extreme growth — this in contrast to thrashing cities like Las Vegas.
17. Snowbirds, politely known as Our Winter Visitors, eventually move here year-around.
18. Our first waves of massive migration occurred after WW II; mustered out soldiers who had been stationed here came back with their families; this pattern continues among people who are posted here temporarily for various reasons.
19. People who stay at our resorts often fall in love with the Valley of the Sun and return as soon as they are able.
20. A significant number of active and retired professional athletes maintain homes here, in no small part because the Phoenix/Scottsdale area has…
21. Year-around golf.

"Pastor" Steven Anderson (Arizona nut), calling for the death of the president: "I'm going to pray that he (Obama) dies and goes to hell."

Want to see why the GOP is now a dead fringe party, hijacked by crazed christian fundamentalist loons?

Want to hear a pure voice of evil?

Here ya go. Skip ahead to 3:36 for the good stuff.

Bonus - why do some "christians" think that god is a god of wrath and vengeance, capable of hate? You think al-qaeda is a threat to America? Look over your shoulder first.

(meanwhile, where's the Secret Service on this one? And anyone want to bet Steven Anderson is yet another closeted Ted Haggard/Larry Craig/Ken Mehlman/Mark Foley gay?)

Heard about the new real estate scam? (hint - realtors ain't done yet)

Everyone heard about the new realtor/homedebtor scam?

I'll sum it up as quick as I can.

1) F*cked homedebtor owes $500,000 on a place now worth $250,000. But they're still employed, can still borrow from a stupid bank (who sells the paper to Fannie)

2) Encouraged by realtors and mortgage brokers, the upside down homedebtor buys the similar place across the street for $250,000.

3) F*cked homedebtor then stops paying on their original home, as they move into their new home. They rent out the old home and earn $2,000 a month cash

4) A year goes by, the homedebtor is finally foreclosed, up $24,000 in cash, and has a $250,000 mortgage instead of a $500,000 one.

America. What a country.

Read the Time magazine cover story on the scam in Vegas. You'll hurl. Here's a snippet.

Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that's about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they've been living in at half the price they paid for their old house.

Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it's willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

Call it by its name. Ignorance.

Ignorant of economics.

Ignorant of history.

Ignorant of religion.

Ignorant of science.

Ignorant of world affairs.

Ignorant of math.

Ignorant of facts.

Ignorant of the fact that they're ignorant.

Willfully ignorant. Swimming in ignorance. Celebrating ignorance.

America, circa 2009. Watching (hopefully) the death throes of ignorance.

America, circa 2009. Where a new and informed generation can't come along soon enough.



[Glad to be retired from blogging during this summer of ignorant American rage]